In the past few years, the company has been helped by this diversification. While the water division has been hurt, as cities have cut back on large-scale water projects and competitive bidding has eaten into margins, the mining business has been on a roll, driven by soaring commodity prices.

Now investors aren't so sure about either business. Worried that mining has reached its cyclical peak, and that weak municipal governments will spend little on water infrastructure for years, investors have all but abandoned the stock. The shares, which closed Friday at $20.90, are down 60% from a 2008 high, and enterprise value (market value plus net debt) is an inexpensive 4.4 times estimated fiscal 2014 earnings before interest, taxes, depreciation, and amortization, or Ebitda. Viewed another way, the company sells for about tangible book value.

But things at Layne Christensen aren't as bad as the market suggests, and there is reason to think the shares could be worth 50% more, or $32, in two years.

In the company's water business, only one division, Heavy Civil, which builds water and wastewater treatment plants, is having trouble, which is masking the good performance of the other units. Moreover, CEO Rene Robichaud, who took the reins in February, has set in motion a turnaround in the problematic unit that could return it to profitability and return water-business profit margins to historic levels.

WITH 130 YEARS IN THE water business, Kansas-based Layne is a giant in the industry. It is the largest driller of water wells in North America, and one of the top 10 global water and wastewater construction firms. In the mining sector, it is the third-largest provider of drilling services.

Layne's water-services business encompasses four divisions: Water Resources, which drills high-volume wells; Inliner, a builder of wastewater pipelines; Geoconstruction, which stabilizes soil for construction of big projects such as dams and tunnels, and the aforementioned Heavy Civil. The last is the largest, and accounted for 41% of segment revenue in the fiscal year that ended Jan. 31.

While the water business generates an outsize percentage of total company revenue, it contributed only 27% of operating profit in the latest fiscal year, due to the weak spending environment. The proportion could increase in coming years as the business improves.

Layne is expected to earn $24 million, or $1.19 a share, on revenue of $1.15 billion in fiscal '13. Analysts are forecasting earnings of $1.75 a share in fiscal 2014.

Robichaud, who had been president since 2011, has a successful history of turning around companies. In 2000, when he took the top job at NS Group, a then-troubled maker of tubular steel products, the company's market value was $150 million. Six years later, NS was sold for $1.5 billion.

Robichaud has made plenty of changes at Layne. He separated the water business into distinct units to increase accountability and better incentivize executives. This month, he sold off the company's noncore exploration and production business for $15 million, with plans to develop a business providing E&P companies with water-infrastructure services. Perhaps most important, he is creating a culture more disciplined on capital budgeting, by not taking on projects that can't beat a 10% after-tax hurdle rate.

The strategy could cure what ails the Heavy Civil division. Since 2009, operating margins in the division fell from 4% to negative 8%, as previous management bid too aggressively on what became money-losing projects. Despite strong results at the other three water divisions, total divisional margins eroded to 1.4% from 6.3% in 2008.

Management has marked six projects as "troubled," and four of these came out of one office. The management team at that office has since been replaced. Robichaud plans to finish the legacy projects off by the end of the year, and improve the profitability of the projects in the backlog. That strategy ultimately could return margins to historical levels. Management couldn't be reached.

AS FOR THE MINING SEGMENT, it is more secure than investors might think. While it has heavy exposure to copper, which has fallen in price as global growth has slowed, and to junior mining companies, which often need to raise equity to fund projects, these aren't substantial problems.

Michael Roomberg, who covers Layne for Ladenburg Thalmann, expects a soft landing for mining. He notes that junior miners are relatively flush with cash after record issuance and cautious investment, and that demand from major miners, whose production costs are still far below current spot prices, will "serve to blunt the impact of an industry slowdown."

Layne has a solid balance sheet, with cash of $36 million to debt of $120 million, or net debt at 15% of total capitalization. In a bullish presentation on the company given at the Value Investing Congress in New York on Oct. 1, Kian Ghazi, managing partner of Hawkshaw Capital Management, said concerns about the impact of weak municipal finances on water spending are misguided. Among other things, he noted that revenue from residents' water bills are used solely to sustain the water system, even if a municipality goes bankrupt.

Ghazi values Layne's mining business at $19 a share, and the water business at $15 a share, for a total value of $32 a share, after net debt. With the stock trading at tangible book, Ghazi believes that the downside is limited. The upside is substantial.